Ulster County announces it plans to cut the sales tax share of the City of Kingston from 11.5 percent to 10. May cut towns a third, from 3 percent to 2. Safety Net welfare costs and election takeover costs are cited.
Is the county broke? Film at 11!
This carefully contrived, cynical negotiating strategy on the part of county government should have been better prepared. But it’s working, in its own Seinfeldian way. Meeting in emergency session on Monday, the town supervisors and the city unanimously agreed to stand in solidarity and push to “maintain the status quo.”
Hey, you’re supposed to bargain upward. In this case, the towns and the city, threatened by the county, have agreed for now to only ask for what they already have.
On the table is a proposal by the county, advanced through the legislature’s Ways and Means Committee. If adopted as suggested, the deal would cost the city upwards of $1.6 million a year in sales tax revenues. At current disbursal rates, the 20 towns would collectively lose about $1.1 million a year.
The justification for this county initiative, as detailed by County Executive Mike Hein (according to Kingston Mayor Steve Noble — see below), Ways and Means Chairman Rich Gerentine and legislature Chairman Ken Ronk, is that the county relieved the towns and the city of some $22 million in Safety Net and elections costs over the last three years, but, in most cases, the lesser jurisdictions have not used that opportunity to cut property taxes. Some have even put a portion of the money into reserves. The county government has concluded that it therefore has the obligation to recover (“claw back”) some of that largesse through a reduction in sales tax payments.
The county can impose this formula arbitrarily, but would then likely face a retaliatory action by Kingston, which legally has the right to impose its own sales tax and deny the county any funds from any sales made within city limits, that would cost the county a far greater sum than it seeks now. So it needs to reach agreement with the city. The towns are beneficiaries, but are not legal parties, to the contract. It is unlikely they will get a seat at the secret negotiations, even as observers.
State Committee on Open Government Director Bob Freeman tells us there’s nothing in the law that allows municipalities to negotiate in secret. Neither is there anything that says they can’t. Given the choice, most politicians choose the hush. As with all previous such negotiations, we’ll know the details they want us to know when they’re done.
What’s behind the strategy?
Hein, who hasn’t spoken on the record to this issue, isn’t saying the county can’t afford to pay out sales tax at current contract levels. Nor should he. Having cut spending by $3.2 million for the 2016 (election-year) budget, Hein reduced the politically sensitive property tax by just over one percent. And he still had money left over for Safety Net and election expenses, estimated at $7 million, and a $500,000 “tax stabilization reserve fund.” The towns and the city, laboring under the state’s draconian property-tax caps — of little concern to the cash-rich county — struggled to balance their budgets in the face of rising costs.
Why would Hein risk alienating virtually every elected official in the county? It doesn’t seem the best way to start a new four-year term. There is a theory going around, to which I don’t yet subscribe and which will be roundly denied, that Hein’s sticking the city and the towns on Safety Net is payback for being forced by Assemblyman Kevin Cahill to accept those costs in the first place. Hein says he was already headed in that direction when Cahill held the county hostage on its 1 percent sales tax add-on renewal, but then we’ve all heard most of that story.
A more plausible theory going around is that after seven years in office, where he cut spending and personnel to the bone and held the property tax at flat levels (a 2 percent increase in the property tax would have produced most of the revenue Hein proposes to take from the city and towns), Hein has left the county with a cash crunch going forward. He doesn’t have any more one-shots, like selling the infirmary or privatizing mental health, left in his budgetary bandolier.
Under a contract between the county and the city established in 1978 and renewed every five years since, the county collects all the local sales tax; it gets 4 percent and the state takes the other 4 percent.
Overall sales-tax revenues for 2016 were projected at almost $110 million. A contract in force since 2001 and thrice renewed allocates 11.5 percent a year to the city (about $12.7 million) and three percent among the towns ($3.3 million). Based on assessment, the big five towns in terms of sales-tax receipts are Saugerties, Woodstock, Olive, New Paltz and Lloyd. Marbletown and Wawarsing get honorable mention.
Of late, word has gotten around, via off-the-record phone calls from the executive’s office, including one to New Paltz Councilman Jeff Logan, that the towns would be left whole. And Rochester Town Supervisor Carl Chipman said he’d received a call from Gerentine to that same effect. Dangling that plum is smart politics. In a town-versus-city scenario, the towns, with 20 of 23 legislators, prevail.
Absolutely nothing of this preemptive strike was mentioned during last year’s county executive campaign. Nor was a peep heard from town or city candidates. Quite the contrary, Hein, during his limited number of campaign appearances, made a point of his administration picking up the burdensome Safety Net expenses (elections costs are only about 10 percent of the total), though rarely noting that Ulster County was the last county in the state to do so.
Deviled eggs and pitchforks
Last week’s turmoil over sales tax distribution reminded me of an early warm October evening where the media had gathered on the sidewalk in front of a fancy French restaurant on Fair Street a block from the County Office Building, awaiting Hein’s arrival for a fundraising cocktail party therein. (The deviled eggs were to die for; I had six.)
Walking toward us, the setting sun in their smiling faces, were Hein and Steve Noble, the latter just off a solid mayoral primary win against Hein über-loyalist Shayne Gallo. The event, obviously staged for the media’s benefit to demonstrate solidarity, featured the two presumed future leaders appeared engaged in serious conversation. Hein was doing the talking. I rather doubt in hindsight that the executive was telling the presumed next mayor he planned, come January, to propose a 10 percent reduction in the city’s second largest source of revenue (behind property taxes).
Noble tells us he was dismayed, after accepting an unspecified invitation for a sit-down with the executive, to arrive at his office to find charts and graphs and other supporting data detailing the county’s argument for clawing back money. In the trade, that’s called ambush politics. Hein is by no means its sole practioner.
Fortunately for city residents, their new mayor didn’t agree to anything. With town supervisors rallying the troops and buttonholing legislators — torches and pitchforks could be next — the heat is on. By the same token, the Noble administration, even after being sandbagged, is preaching conciliation.
Some might also wonder how former mayor Shayne Gallo might have dealt with this situation. Might he have parked city dump trucks at each entrance to the county office building? We’ll never know. His successor had no clue, because, to Gallo’s lasting infamy, there was no transition between Democratic administrations.
Forewarned and forearmed, the city and towns could form a united front against the county and maybe in the process come out with more, not less, of the county sales tax pot. They really have no other strategic choice.
History lessons
There were two key events in sales tax history; what’s on the table now — the unprecedented reduction in county sales taxes to its municipalities — may in time be considered the third.
Mayor Ray Garraghan knew in 1968 that a city sales tax would serve two purposes — give a city devastated by urban renewal a new, steady stream of easy cash and place Kingston in a strong bargaining position should the county seek its own sales tax. Since the city had an existing sales tax, it retained preemptive rights in any future negotiations.
Join the family! 
